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Equipment industry: Time for FET to surrender

As America celebrates the 100-year anniversary of the end of World War I (Armistice Day), the American Truck Dealers (ATD) and other transportation equipment trade groups are calling on Congress to repeal the 101-year-old federal excise tax (FET) on heavy-duty trucks and trailers.

Initially imposed in 1917, the FET was meant to be a temporary measure to help pay for World War I. Although the tax was briefly repealed after the Great War ended, it was reinstituted and today is the highest percentage tax that Congress levies on a product, according to ATD. The FET routinely adds between $12,000 - $22,000 to the cost of a new truck.

“The FET is as outdated as biplanes and trench warfare,” said ATD Chairwoman Jodie Teuton, vice president of Kenworth of Louisiana and Hino of Baton Rouge. “This tax discourages deployment of today’s cleaner, safer and more fuel-efficient heavy-duty trucks. Now is the time to repeal the FET and replace it with a 21st century policy and revenue structure that meets the needs of our economy.”

Indeed, two bills, H.R. 2946 and S. 3052, have been introduced which would repeal the antiquated FET. ATD and a coalition of trucking industry stakeholders are urging Congress to revisit this tax and consider the FET repeal as part of a likely infrastructure bill coming next year.

Gwendolyn Brown, president of the National Trailer Dealers Association, also argues that FET rules are “outdated and confusing” when it comes to assessing modern equipment, but she also notes the political challenge of convincing Congress to drop such an established source of revenue. “The Federal Excise Tax has long been an unfair method of taxation of the truck and trailer industry. The NTDA continues to support any proposal that would make the legislation more fair and either reduce or cap the amount of FET,” Brown said. “Unfortunately, complete repeal of the FET is unlikely without a stable means of replacement support for the Highway Trust Fund.”

But support for a repeal is widespread in the heavy-duty transportation equipment industry.

“The FET is not simply a barrier to selling more vehicles – it is a barrier to the public being able to drive alongside the cleanest, safest and most technologically advanced trucks built today,” said Jake Jacoby, president and CEO of the Truck Renting and Leasing Association. “To have a tax that literally discourages businesses from purchasing the newest available equipment hurts all involved – from the manufacturer, to the dealer, to the purchaser and ultimately the end user.”

Mike Kastner, managing director of NTEA - The Association for the Work Truck Industry, said, “The 12-percent federal excise tax on trucks and truck equipment primarily manufactured in the U.S. is antiquated, overly complex, and counterproductive to safety and environmental concerns. We advocate that this tax be repealed for the betterment of the work truck industry and the economy at large.”